1. (U) Summary. With three weeks to go, opinion polls and political commentators and contacts all say Berlin's September 17 election of a new parliament is the SPD's to lose. The Social Democrats lead the Christian Democrats by over ten percent in all polls and the ratings gap between the two parties' candidates for Mayor is even greater. Real interest is already focusing on whom the SPD will chose as a coalition partner – the Left Party.PDS with which the SPD now governs the city, or the Green Party. The election, which is expected, in essence, to confirm Berlin's left of center majority, will have no immediate national political implications. However, Mayor Wowereit has signaled his interest in playing a role in national SPD politics in the future. Because of the predicted low turnout, concerns have been expressed by some observers that parties of the far-right will gain seats in some of Berlin's district assemblies. End Summary.

The Campaign: SPD in Charge; CDU in Tatters--------------------------------------------

2. (C) The state of Berlin leaves much to be desired – the weak school system has been the subject of a steady drumbeat of critical headlines for months; the business climate is at best stagnant and high-profile departures or attempted departures of big employers are an issue; the city's enormous debt continues to grow steadily and is now at 60 billion euros. Nonetheless, support for the SPD remains strong at 30-35 percent (ahead of the 29 percent taken in 2001) and Mayor Wowereit is genuinely popular. CDU xxxxx admits that the CDU's lead candidate, Friedbert Pflueger, simply cannot match Wowereit for charisma and campaign skills. Moreover, the Berlin CDU has been damaged by: 1) years of infighting and tension between modernizers in the party, including Pflueger, and old-school conservatives; and 2) the lingering effects of a banking scandal that drove it from office in 2001. Pflueger, from Lower Saxony, also suffers from a carpetbagger image – his last-minute announcement that he would give up his Bundestag membership and Defense Ministry State Secretaryship to concentrate on Berlin has not helped. The CDU has been hovering at around 20 percent in polls since even before the campaign began.

3. (C) CDU and SPD contacts agree that the turnout for the election will likely be very low. SPD Berlin Business Manager Ruediger Scholz fears this could hurt the SPD more than the CDU and so the party intends to focus on getting its core supporters to the polls in the final weeks of the campaign. Scholz points out that a low turnout is likely to benefit smaller parties with more ideological voters – meaning the far-left WASG and the far-right NPD and Republicans. He and most other interlocutors seem to expect that the far-right will win seats in the district assemblies in at least some of Berlin's eastern districts while the WASG could win seats in Kreuzberg-Friedrichshain. The threshold for entry is winning only three percent of district votes. Neither far-right nor far-left is given any chance of clearing the five percent threshold for entry into the state parliament.

Coalition Politics-----------------

4. (C) The Left Party.PDS, according to Berlin leader Klaus Lederer, cannot expect a repeat of its 23 percent performance in 2001. That showing was the result of the banking scandal, which briefly tarred the SPD as well as CDU, and the star quality of then-PDS lead candidate Gregor Gysi, now fully occupied in the Bundestag. Polls put the LP.PDS at around 15 percent, which is where the Greens also stand. Thus, either party could be a plausible partner for the SPD. Mayor Wowereit has stated his desire to remain in government with the LP.PDS, though the two parties have not concluded a formal electoral alliance. The SPD's Scholz, Green Berlin caucus leader Sibyll Klotz, and Berlin FDP leader Markus Loening all agree that the LP.PDS would make the more comfortable partner for Wowereit because of the ease of their cooperation thus far and because keeping the LP.PDS in government defuses a large bloc of voters who could be mobilized easily to protest the cuts and privatizations which the government has used to try and recover control of the budget. However, Scholz notes that it would probably be better for the city and for Wowereit given his political ambitions, if he were to form a coalition with the Greens, who are more centrist (especially on finance) and, at the federal level, presentable. Green state parliament member Oezcan Mutlu argued strongly that Wowereit will opt for the Greens based on these considerations, though he acknowledged that working with the Greens would be harder. He even said that, given Green fractiousness, they would have to bring a 7-8 seat majority into a coalition to make it stable.

5. (C) If the numbers did not work out for a two-party coalition (and all our contacts reject the idea of a Grand Coalition), then the most likely option seems to be an SPD-LP.PDS-Green alliance. However, some in the FDP (now at 8-9 percent in polls) hope that in such a situation, they might have a chance of sidling into power. Berlin FDP lead candidate Martin Lindner and Loening have told us that they believe the Greens would rather work with them than the LP.PDS. This seems quite a long shot, though, as Berlin Greens stand quite far to the left in the Green spectrum.

Comment-------

6. (C) The Berlin election is unlikely to have major national significance under any circumstances. The Grand Coalition recognizes this and, unlike in the period before the spring elections in Baden-Wuerttemberg, Rhineland-Palatinate and Saxony-Anhalt, is not postponing debate on contentious issues. However, in two aspects the elections are noteworthy. First, a victory will boost Klaus Wowereit's chance of playing a greater role in the SPD nationally, especially as he is seen as a standard-bearer for the party left. Second, even very localized success by the far-right will provoke comment and a measure of consternation and signal that the particular problem posed by far-rightist ideologues in eastern Germany remains to be resolved. End Comment. KOENIG

1. (U) As widely expected, Berlin's SPD won the Sept. 17 state election, taking 30.9 percent of the vote, up slightly since the 2001 election. The SPD will have the option of forming a government with either the Left Party.PDS or the Greens, both of which took just over 13 percent of the vote. Either coalition will have only a one-vote majority in the Berlin legislature. Before the election, Mayor Wowereit (SPD) had indicated a preference for renewing the coalition with the Left Party.PDS. The conservative Christian Democrats, led by Defense State Secretary Friedbert Pflueger, performed poorly, taking only 21.2 percent, down slightly from 2001. Likewise, the liberal Free Democrats also lost votes, taking only 7.6 percent.

2. (U) The poll was marked by a very low turnout of only 59 percent of voters and by the high percent of the vote (nearly 14) given to parties which did not clear the 5 percent hurdle for entry into parliament. The latter enables the SPD to gain a majority of seats with either the LP.PDS or Greens, despite having under 45 percent of the popular vote with either party. In addition, the far-right NPD performed slightly better than expected, gaining seats in four Berlin district assemblies, including one in the west.

3. (U) Comment: Though the NPD performed slightly better than expected in some districts, city-wide the party fell far below the five percent hurdle for election to the state parliament. The election should also not be seen as a referendum on the national government or Chancellor Merkel. Local factors, especially CDU internal weaknesses and the CDU mayoral candidate's lack of personal appeal, more than account for the CDU's poor result. End Comment. TIMKEN JR

1. (U) After six weeks of negotiations followed by overwhelming endorsements at state-level party conventions, Berlin's Social Democrats (SPD) and Left Party.PDS (LP.PDS) have announced all the members of the new cabinet (Senat), which will be elected by the state parliament on November 23. Despite flirting with the Greens, the SPD decided early to opt for a renewal of the coalition with the LP.PDS. Governing Mayor Wowereit will return to office and has also decided, in a move clearly reflecting personal preferences, to take on the cultural affairs portfolio. Left Party.PDS Deputy Mayor Harold Wolf returns to the cabinet as Senator (Minister) for Economic Affairs. In a surprise move, the SPD has recruited an Education Senator (Minister) from the West -- Juergen Zoellner, now Minister for Education in Rhineland-Palatinate (governed by SPD Chairman Kurt Beck) will take on the same portfolio in Berlin. The other members of the incoming cabinet are: Justice - Gisela von der Aue (SPD); City Development - Ingeborg Junge Reyer (SPD); Finance: Thilo Sarrazin (SPD); Interior - Erhart Koerting (SPD); Health and Environment - Katrin Lompscher (LP.PDS); and Social and Labor Affairs - Heidi Knake-Werner (LP.PDS).

2. (U) Zoellner's move to Berlin reflects one of the new governments priorities -- restructuring of Berlin's school system. Both parties would like to move towards more unified instruction in middle and secondary school, and Zoellner will oversee initial projects aimed at bringing all students into a unified system until 10th grade. The other great challenge for Berlin's government is financial: the city's debt stands at roughly 61 billion euros and continues to grow. The city lost a recent court case designed to force the federal government to increase its financial transfers to the city and the LP.PDS has taken a principled stand against privatization of the public housing stock -- one way German cities have eliminated their debts. Finance Senator Sarrazin is enjoying an unexpected rise in tax revenue, but city debt is an issue which could prove very difficult for the new government.

3. (U) Other priorities in the 88-page coalition agreement negotiated between the two parties include: Economic and labor market policy in which the government hopes to take an active hand in steering development and boosting public (or publicly subsidized) employment, especially for low-skill workers; and integration of minorities, with a particular focus on early education and language development. The draft budget included in the agreement forecasts a rise in city debt to 65 billion euros in 2010, though with a significant decrease in the rate of growth of new debt. TIMKEN JR